Rio committed to African iron ore

Despite the slow progress of Rio Tinto's African Simandou iron ore project the company remains committed to its development.

Resource nationalism and negotiations around who will be picking up the bill for infrastructure, are reported to be  the main factors for the project’s loss of momentum.

Conducting business in Guinea has proved difficult with local government pushing for larger stakes in the project over the years.

In 2011 Rio was forced to make a $US700 million payment to retain the project.

Reuters this week reported a "freeze" has been put on the project and staff had been cut, linking the halt to continued investment framework delays.

The Simandou project has previously been labelled Africa’s largest private infrastructure project and has been considered as one of the most high-risk, high-reward projects in the developing world, SMH reported.

The project, a joint venture with the World Bank's International Finance Corporation and a Chinese state-owned enterprise, was projected to ship almost as much iron ore each year as Fortescue Metals Group does in the Pilbara today.

But an agreement that sets out how much funding each party is expected to secure for a project tipped to cost more than $US10 billion remains outstanding.

According to SMH Rio has voiced expectations that the Guinean Government would secure financing to support a 51 per cent stake in the port and rail costs, but progress is slow.

Rio's head of Simandou, Alan Davies, said in January that the company couldn't push ahead with further work until it was clear who was paying for what.

Countering reports that the project was frozen, Rio confirmed discussions had been held with the government in recent days.

"The Simandou project is definitely not frozen and Rio Tinto continues to progress the project and is committed to its development. The current priority is finalising the investment framework and for the government of Guinea to secure its financing," said a spokesman for the company.

Rio's new chief executive Sam Walsh has also said he is committed to keeping the Simandou project on track to development despite implementing a tough cost cutting regime.

The motive behind the company’s commitment has been questioned, with some saying that perhaps it is more of an obligation as the task to locate a buyer for an extensive greenfield iron ore project in an unpredictable jurisdiction when iron ore prices continue to fluctuate, would be difficult. 

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